“Blockbusters”: Why The Long Tail Is Dead And Go-Big Strategies Pay Off

Anita Elberse turned the long tail on its head during her keynote at the FutureM conference hosted by MITX in Boston last week. The popular professor of business administration at Harvard Business School discussed her new book, Blockbusters, which looks at what drives huge success in the entertainment industry, and how these lessons can translate to other sectors.

It was a fascinating talk. To introduce her premise, Elberse compared the strategies and results of two business leaders in the entertainment world: Jeff Zucker, as head of NBC and Alan Horn as president of Warner Bros. Elberse explained, Jeff Zucker focused on cutting spending and managing for maximum profitability across all of its programming. Alan Horn, on the other hand, had the opposite strategy: embrace risk and make a few huge bets a year.

The results? NBC fell from number one to the number four network and profits tanked. Warner Bros. experienced one of its most profitable decades under Horn’s leadership.

“The notion of smaller bets being safer is a myth,” Elberse told the audience. “It is safer to make bigger bets because they are likely to have bigger outcomes.”

That’s not to say every effort to make a blockbuster succeeds, of course, but scale brings marketing advantages. Additionally, Elberse said, the blockbuster strategy fits the way in which consumers choose — they like to be able to talk with others about what they watch listen to and read.

Likewise, producers and companies seeking spokespeople are better off betting on the A-list stars. Pepsi paying Beyonce $50 million for a multi-year “partnership” is, in fact, a safer bet than recruiting a less expensive B-level star. But that move makes it more pressing for the strategy to succeed. Elberse finds, that in most cases, these “big bets become self-fulfilling prophesies” because companies and individuals understand how high the stakes are and are more driven to produce great outcomes.

“Producers feel they can barely afford to compete for A-level stars, but they can’t afford not to,” explained Elberse in discussing the tug-of-war that can happen between stars and the companies that hire them.

Impact on digital technology and marketing

Digital technology has lowered the cost of selling and buying. With that came the long tail theory, popularized by Chris Anderson in Wired and later his 2006 book The Long Tail: Why the Future of Businesses is Selling Less of More, held in the bulk of revenue now would be driven by small volume sales of thousands of niche products.

It was a wonderful egalitarian theory that would have us supporting small publishers, young authors, fringe artists and macrame jean makers. Pop culture and mass market would no longer rule commerce. The belief was, as Elberse put it, “The hits of the past were artificial because consumers’ choices were limited.” Digital technology would usher in the end of the blockbuster.

But that’s not what happened, said Elberse,

The notion that the tail was going to be most important turned out to be wrong. The tail is actually getting thinner and thinner. We’re now looking at more concentrated markets where the winner takes all.

To illustrate the death of the long tail, Elberse charted the sales performance for music tracks in 2011. Just 102 music titles accounted for 15 percent of total sales that year — that’s .0001 percent of the 8 million sold. In contrast 74 percent of music titles — over 5 million — made up just 1 percent of all sales in 2011.

Other examples of companies recognizing the long tail is the exception not the rule, Elberse highlighted:

Spotify has 20 million tracks available. One fifth (four million) have never been played.

Former Google CEO, Eric Schmidt, said he’d believed AdWords would be tail driven, but found in reality it’s a 90/10 model with major advertisers generating most of the revenue.

Netflix has become better at curating content instead of carrying every title.

Hulu figured out the benefits of curation early and has much higher ad rates than YouTube.

YouTube is putting the $100 million its investing in original channels behind the Jay Zs of the world.

So what does the future hold?

The stakes will continue rise, and success will become even more concentrated among the stars who can command huge deals and the companies that have the scale to bet on them. The go-big strategies that are effective in entertainment are increasingly relevant to other sectors, said Elberse.

Elberse cited serveral examples of this happening already: hospitality, with big clubs that can afford the biggest DJs; Apple, which has always focused on a few products and been willing to take big bets on their execution and launch; the Victoria’s Secret fashion show featuring top models has become a huge blockbuster event; Red Bull is turning into a media company focused on big events like Felix Baumgartner’s supersonic freefall.

Spreading risk around is less likely to result in a big payout. What seems like the risky strategy actually yields the highest average returns.

About The Author

As Third Door Media's paid media reporter, Ginny Marvin writes about paid online marketing topics including paid search, paid social, display and retargeting for Search Engine Land and Marketing Land. With more than 15 years of marketing experience, Ginny has held both in-house and agency management positions. She provides search marketing and demand generation advice for ecommerce companies and can be found on Twitter as @ginnymarvin.

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Do we have data from previous years on market share of the big titles vs. the tail? That the long tail gets thinner as it gets longer doesn’t mean the phenomenon is dying IMO- as cost of entry decreases, you’re going to get a lot of titles being published that have very little sales potential. Even if the tail gets thinner as it gets longer, its overall size (sales or market share) may stay the same or increase.

http://www.rockcheetah.com/blog/ RobertKCole

Interesting to use Alan Horn as an example, especially since Time Warner pushed him out of the organization in 2011 after a decade of developing the Harry Potter and Dark Knight franchises… I guess the success of Disney Studios will tell the story, since that is where Horn landed…

Travel Brainz

Long-tail is always going to be secondary to core fat-tail, it offers clients choice even if they know what they want, they feel better knowing that they don’t need to go elsewhere to find everything… Look at Amazon, AliBaba and Ebay. Fat-tail costs more to source and maintain but the return is higher, long-tail costs less to source and maintain, the returns are lower, but it adds choice and value to your proposition and brings greater volume of clients, as your net is spread wider.

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